Copying files from new installation to host.
Copying files from /tmp/biL36tbPF5/var/cache/apt/archives -> /var/cache/apt/archives
Done
Done
The installation of the new system appears to have failed.

There is no '/bin/ls' installed in the new installation directory
Done
System installation failed. Aborting

Here I was trying to install an arch amd64 with my local mirror, which (i forgot) only had i386. So obviously it would not work. You either have to install an arch available, in this case i386, or modify the mirror so that amd64 is available.

The --arch i386 option solved the problem.

code:
xen-create-image --arch i386 --hostname test

And then I set my mirror to also download the amd64 architecture adding to /etc/apt/mirror.list: